Particular Report: The UAE is the hub for corporations serving to Venezuela keep away from US oil sanctions

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© Reuters. FILE PHOTO: A worker collects a sample of crude oil from an oil well owned by the Venezuelan state oil company PDVSA in Morichal

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By Luc Cohen and Marianna Parraga

NEW YORK (Reuters) – In June, the US imposed sanctions on half a dozen oil tankers operated by established shipping companies. It was a major escalation in American attempts to stifle Venezuela's oil trade.

Within a few weeks, a little-known company based in the United Arab Emirates took over the management of several tankers carrying Venezuelan oil. The ships got new names. And then they resumed the transportation of Venezuelan crude oil.

The company Muhit Maritime FZE is one of three companies based in the United Arab Emirates identified by Reuters that supplied Venezuelan crude oil and fuel in the second half of the year. Your role arises from an examination of the internal shipping documents of the Venezuelan state oil company as well as shipping and ship tracking data from third parties. Company-managed tankers have transported millions of barrels of oil produced by the state-owned Petroleos de Venezuela SA (PDVSA) since June. This is evident from internal documents and a publicly accessible shipping database.

The activity shows how the UAE, one of Washington’s closest allies in the Middle East, is a hub for companies helping Venezuela evade American sanctions. Washington hopes to overthrow Socialist President Nicolas Maduro by cutting off the oil-rich nation's crude oil exports.

The three companies – Muhit Maritime, Issa Shipping FZE, and Asia Charm Ltd – did not respond to letters sent to their specified addresses or to emails sent to their registered email addresses. Reuters was unable to determine the final owners of the three. Your ownership and management details are not listed on the UAE publicly accessible business register.

The role of the three companies in shipping Venezuelan oil underscores how a number of little-known companies filled the void when Washington tried to deter incumbent buyers and shipping companies from facilitating the South American country's crude oil exports.

Previously unknown companies emerged as the main buyers of Venezuelan crude oil this year, Reuters reported in November. Most of these buyers were registered with a Moscow-based trading company that year. Russia is one of Venezuela's closest allies.

A similar pattern can now be seen among companies involved in transporting the oil. The three UAE companies identified by Reuters have been building their fleets since early 2019 with ships that have since made mostly Venezuela-related trips. This emerges from the ship tracking data from Refinitiv Eikon and the ship database Equasis. New York-based Refinitiv is part of Reuters' parent company. Thomson Reuters (NYSE :).

Deliveries of Venezuelan crude oil and fuel by the three companies accounted for around 3.9% of the South American country's total oil exports as of December 18, 2020. This oil had a market value of around $ 208.5 million at market prices for the country's flagship known as the Merey. Crude oil sales provide much-needed support to Maduro's government, despite Reuters failing to determine how much has been added to the state coffers. PDVSA often sells its crude oil at high discounts, and some of the proceeds are used to pay off debts rather than generating cash.

"We are closely following these creative efforts by companies to evade sanctions," a US State Department spokesman responded to questions about the companies registered in the UAE. "Those behind Shell companies would not be wise to keep themselves safe from sanctions."

The spokesman declined to comment on possible future sanctions, but added: "US friends and opponents alike should know that their companies, frontline firms and tankers remain vulnerable to sanctions if they engage in activities that affect exports." from PDVSA abroad and facilitate the efforts of the Maduro regime to evade sanctions. "

The United Arab Emirates government said in a statement that "a thorough and comprehensive investigation of Muhit Maritime, Issa Shipping and Asia Charm is ongoing". This includes using recent legislative changes "to improve corporate transparency through a framework for reporting and registering beneficial ownership," it said.

“The UAE takes its role in protecting the integrity of the global financial system very seriously. This means that economic and trade sanctions are actively managed and enforced, ”the government added.

A representative from the Fujairah Free Zone, where Issa Shipping and Asia Charm are based, said he was unaware of the two companies' involvement in the transportation of Venezuelan oil. He said the agency is not responsible for overseeing the activities of the companies registered there.

The authority responsible for the Jebel Ali Free Trade Zone, where Muhit Maritime is located, did not respond to requests for comments.

The Venezuelan Ministry of Information did not respond to a request for comment. The country's oil ministry, its embassy in the United Arab Emirates and the state-owned oil company PDVSA also failed to respond.

Washington has accused another country under heavy sanctions, Iran, of using Emirati companies to facilitate crude oil exports. The U.S. Treasury Department this year sanctioned more than half a dozen UAE-based companies for engaging in the purchase or brokerage of the sale of Iranian oil and petrochemical products, and in some cases for forging documents, in violation of its sanctions to hide the origin.

The Iranian Mission to the United Nations did not respond to a request for comment.

EXTENSION OF SANCTIONS

The United States significantly increased Venezuelan sanctions following the 2018 re-election of Maduro, which the United States and many other Western nations described as fraudulent.

In January 2019, Washington imposed trade sanctions on the state-owned oil company PDVSA. US refiners, which were the main buyers of Venezuelan crude oil, could no longer do business with PDVSA.

In early 2020, the US blacklisted two units of the Russian state oil company Rosneft that had become key intermediaries for PDVSA. The units stopped lifting Venezuelan crude oil in March.

Then, in June, Washington sanctioned the ships it accused of carrying Venezuelan oil and their registered owners.

It can be difficult to determine who is behind a tanker. Oil tankers are often operated by a management company that is responsible for the crew and can manage freight contracts. The management company may be a separate entity from the registered owner, which is usually a special purpose vehicle that only owns this ship. However, it is also common for the manager to own the special vehicle.

For most in the industry, the main point of using specialty vehicles is to isolate owners and managers from liability without evading law enforcement. However, changes to a ship's ownership and management registrations can affect control over who is in control, especially if the ship is registered in countries with loose disclosure requirements.

Until recently, companies based in the Emirates' free zones were often not required to disclose beneficial ownership, according to Lakshmi Kumar, policy director at Global Financial Integrity, a Washington-based think tank. Under the new UAE regulations, most types of Emirates companies have been required to disclose beneficial owners to authorities since October. According to the auditing company PwC, the new rules do not have to be made public.

Among the ships sanctioned by the U.S. Treasury Department in June was an oil tanker called Euroforce, which was then managed by the Greece-based ship operator Eurotankers Inc. The Treasury Department later lifted sanctions against the ships.

Between July and August, Muhit Maritime took over the management of three more vessels operated by Eurotankers, according to Equasis, a database maintained by a group of national maritime administrations.

All three tankers had transported Venezuelan oil before the change in management, according to internal PDVSA documents checked by Reuters.

A representative from Eurotankers told Reuters that the company had sold two of the tankers to Muhit Maritime in the summer. "We have no equity connection with the buyer," he said. He didn't say what Eurotankers did to the third ship. Equasis records show that it also came under the direction of Muhit Maritime.

The registered owners of the three ships also changed in July and August, as Equasis shows. Two of the registered owners of the ships only give their addresses as "Care of Muhit Maritime". The third lists a unit in Monrovia, Liberia. None of the owners could be reached for comment.

ASIA BOND

According to Equasis, the three tankers also got new names this summer – Alsatayir, Almada and Alasfal.

A shipping document shows that the newly renamed Almada set sail on July 31 after a ship-to-ship transfer from Alasfal off the coast of Venezuela with around 650,000 barrels of Venezuelan Boscan crude oil.

Three weeks later, on August 21, the Alsatayir loaded 650,000 barrels of Boscan crude oil in a similar ship-to-ship transfer. Together, these shipments were valued at around $ 40 million based on Venezuelan oil market prices at the time.

The Alsatayir and Almada drove into waters off Malaysia, where, according to Refinitiv Eikon, they switched their cargoes to other tankers at sea in mid-October.

The Alsatayir's cargo was received by a tanker named Afra Royal and Emma Li, a Singapore-based analyst at Refinitiv, according to the data. The Afra Royal drove to the Chinese port of Qingdao, where it unloaded 644,715 barrels on November 5, according to data from Refinitiv Eikon. The listed owners and managers of the ship did not respond to requests for comments.

The ship tracking data does not make the final destination of the Almada's cargo clear. The Almada once again changed its name and registered owner and shipping manager in October, according to Equasis. Reuters has not been able to determine who is behind the new company.

Reuters reported in June that 19.7 million barrels of oil came to China by ship-to-ship transfer in 2019, a process that obscured the true origins of the crude oil. China is a close ally of Venezuela.

A representative from China's foreign ministry said in a statement that Beijing is "unaware" that Venezuelan crude oil continues to arrive in China. Still, China promised to continue to work with Caracas, criticized Washington's "unilateral" sanctions, and tried to use the "long-armed judiciary".

"We can't do politics"

Muhit Maritime's tanker transactions are similar to previous transactions by the other two Emirati companies Issa Shipping and Asia Charm.

According to Equasis, Issa took over the management of three very large crude oil transport companies from Greece-based Altomare SA between January and May this year. Altomare did not respond to a request for comment.

The database shows that the three ships are the only ships in Issa Shipping's fleet. Issa Shipping was founded in the second half of 2019, according to the Fujairah Free Zone Authority.

The three supertankers – Kelly, Marbella and Rene – each carried nearly 2 million barrels of Venezuelan crude oil and fuel in the first half of 2020 after being under Issa's management, according to a number of internal PDVSA shipping documents.

These PDVSA documents list the destinations for the ships: the Rene was destined for China, the Kelly for Asia and the Marbella for Fujairah in the United Arab Emirates. Reuters could not determine where the oil ended up.

According to Equasis, Asia Charm took over the management of a tanker from the Finnish company Lundqvist Rederierna AB in July 2019.

Dick Borman, quality and safety management consultant at Lundqvist Rederierna, said selling the tanker was "simply a business decision" as it no longer matched the age profile of the fleet.

The paper trail shows some connections between the Issa and Asia Charm fleets.

A tanker that was managed by Asia Charm is now called Yoselin. For the past few months, the yoselin has been shipping Venezuelan crude oil and fuel to other tankers off the country's coast, which then exported it. Ships that picked up Yoselin's oil include the Marbella, Kelly and Rene, now operated by Issa. Yoselin is one of 15 ships in Asia Charm's fleet, as Equasis shows. All 15 have traveled solely in connection with Venezuela, Refinitiv Eikon ship tracking data shows.

Another thing Asia Charm and Issa Shipping have in common: According to Equasis, both are registered at an address in the same office building in Fujairah. The registered owner of the Yoselin did not respond to a request for comment sent through an email address for Asia Charm.

Fujairah Free Zone Authority's director general Sharief Al Awadhi said the agency knows the identity of the beneficial owners of all companies registered there, including Issa Shipping and Asia Charm, but it does not publicly disclose this information. He said Issa Shipping is owned by an individual on his own behalf. he refused to identify him. Al Awadhi said Asia Charm's parent company is a Liberian company of the same name.

According to Al Awadhi, Fujairah will provide law enforcement agencies with information on publicly traded companies upon request. He added that the agency would stop this if there were any signs of a rule violation.

"We're not here to be incubators for someone who wants to play with international systems and laws," he said. However, the agency is not responsible for monitoring the activities of companies registered in its area of ​​responsibility. "We can't run the police."

CARIBBEAN RETURN

Washington has failed to oust Maduro, but US sanctions have crushed the Venezuelan oil sector. Exports fell by a third to around 1 million barrels per day in 2019. By October, they hit a decade-long low of 359,000 barrels a day. But Caracas keeps trying to move the crude oil. In November, daily exports nearly doubled thanks to the emergence of new, little-known customers.

The upswing also followed a wave of changes of control in tanker fleets.

38 of the 75 tankers that transported Venezuelan crude oil or fuel between July and November were given new owners, managers, or both in 2020, according to internal PDVSA documents and Equasis.

Many of the new owners or managers were little known companies like Muhit Maritime. Prior to this year's shipping sanctions, the majority of the tankers carrying Venezuelan crude oil were owned by established shipping companies.

According to PDVSA documents, the 38 ships carried a little more than half of Venezuela's total exports from July to November. That oil was valued at just over $ 1 billion based on the estimated price of Venezuela's flagship Merey crude at the time of export.

The ships of the three Emirates-based companies are now in the Caribbean.

Marbella, managed by Issa Shipping, traveled to Venezuela and shipped nearly 2 million barrels in early December. The PD should transport the same amount between the end of December and the beginning of January as documented by PDVSA documents.

The Muhit Maritime fleet is also back in the neighborhood, as data from Refinitiv Eikon show. As of mid-December, the Alsatayir was 48 km off the north coast of Venezuela.

And the Nabiin lies in front of the Paraguana Peninsula. According to the Equasis database, Muhit Maritime took over this ship in November. It used to be called Euroforce – one of the tankers Washington sanctioned in June.

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